HST Tax Information

Website Link:
http://www.ngcoa.ca/benefits/index.aspx?l=0,1,32,101,1935#cra 

The below is information for members and guest of how the new HST tax will effect green fees/memberships.


The OHST Committee has now finally received WRITTEN CONFIRMATION from Canada Revenue Agency (CRA) – specifically the GST/HST Rulings section of the Services and Intangibles Unit which will be the department in charge of this tax as of July 1, 2010 – on defining the interpretation of Transitional Rules for the golf industry: specifically golf membership sales, multi-pack green fee sales, lifetime memberships, etc. Here are the written responses that the OHST Committee received on Friday, December 11th, 2009:

1. Green fees sold for use on the day of play until June 30, 2010 incur only the GST (5%) charge. From July 1, 2010 and going forward, you must charge HST (13%) on the total. CRA confirmed this in writing on Dec. 11th. In addition it was noted, “Golf green fees are consideration for supplies of property for GST/HST purposes, specifically, a right to use a golf course. As such, the transitional rules for leases and licenses of property would apply to the green fees.”

2. Multi-packs of golf green fees - please see the following CRA written response on Dec. 11th:
- For a multi-pack of golf green fees in respect of the 2010 golf season, where the consideration payable for the multi-pack becomes due, or is paid without having become due after October 14, 2009 and before May 2010, a Supplier would only charge the GST (5%).
- For a multi-pack of golf green fees in respect of the 2010 golf season, where the consideration payable for the multi-pack becomes due, or is paid without having become due, on or after May 1, 2010 and before July 2010, a Supplier would charge the HST (13%) to the extent that the consideration is attributable to that part of the 2010 golf season that occurs on or after July 1, 2010. For purposes of determining the portion of the consideration on which the HST would apply, we would generally take into account that portion of the 2010 golf season that remains as of the date the multi-pack is sold.
- For a multi-pack of golf green fees in respect of the 2010 golf season, where the consideration payable for the multi-pack becomes due or is paid without having become due on or after July 1, 2010, a Supplier would charge the HST (13%).
3. 2010 golf memberships / annual golf dues: CRA confirmed the following information is essentially correct in writing on Dec. 11th. In addition it was noted, “However, the application will depend on the date that either the consideration becomes due (for example, the date on the invoice or the date it is issued, whichever is earlier) or the date it is paid without having become due.”
- If the golf membership fees become due, or are paid without having become due, by April 30th, 2010, the Supplier will only need to charge GST (5%) on the amount charged.  
- If the golf membership fees become due, or are paid without having become due, from May 1st, 2010 to June 30th, 2010 inclusive, the Supplier would prorate the golf fees based on the membership period and charge HST (13%) for the portion of the membership that occurs on and after July 1, 2010.
- From July 1, 2010, the Supplier would charge HST (13%) on the amount charged.
4. Regarding the pro-rating mentioned above in Question # 3, would this be based on a 12 month calendar year OR is this based on the length of the golf season (typically 6 month – May to October)? - please see the following CRA written response on Dec. 11th:
- It depends on the actual golf membership supplied. If the Supplier indicates that the golf membership provides rights for the full calendar year (for example, the clubhouse is open to members year-round), then the Supplier would prorate the membership period on that basis. If the Supplier indicates that the golf membership only provide rights for certain months (for example, the membership is valid from May to October 2010), and there are no benefits associated with the membership outside of those months, then the Supplier would prorate the membership period on that basis.
- Where the membership period is for the golf season, but the exact length of the period is not known when the membership is sold, the Supplier could prorate the membership period based on a typical golf season at that Supplier’s golf course using historical information.
5. Initiation Fees (either equity membership or non-equity membership):
If a new member joins a private golf club before July 1, 2010 should the golf facility continue to charge only GST to this amount but then charge the HST (13%) to the initiation fee if a new member signs up after July 1st?
If the initiation fee is paid over a multi-year arrangement (i.e. $5000 a year for the next 3 years), what portion would you charge GST to and which portion would you charge the OHST to?
CRA has not yet made a ruling on this yet, they are still debating the distinction of initiation fees internally.
6. Lifetime golf memberships - please see the following CRA written response on Dec. 11th:
- For any lifetime golf memberships sold after October 14, 2009 and before July 2010, where the consideration in full becomes due or is paid without having become due at that time, the Supplier would charge GST on 25% of the consideration and HST on 75% of the consideration.
- For a lifetime golf membership that is paid over a multi-year arrangement (e.g. $10,000 a year for the next 3 years), the Supplier would charge HST (13%) on any portion that becomes due or is paid without having become due after October 14, 2009 and before July 2010, that exceeds 25% of the total consideration. In the example provided, the total consideration for the lifetime membership is $30,000, and 25% of that amount is $7,500. If the first $10,000 becomes due or is paid without having become due after October 14, 2009 and before July 2010, the Supplier would charge GST (5%) on the $7,500 and HST (13%) on the remaining $2,500. The two remaining payments would be subject to HST (13%) as they would become due or be paid without having become due after July 1, 2010.
7. Specific lifetime golf memberships and initiation fees questions from one of our members:
Question
-Is a "lifetime membership" the same as an initiation fee or entrance fee? If so, based on what I'm reading, HST applies to initiation fees charged from this point on.
-Assuming that a "lifetime membership" and an initiation fee are the same, what would be the tax implications of the following scenario:
-A club has a $20,000 initiation fee.
-A member can elect to be billed the entire $20,000 at once or he can elect to be billed $24,000 ($6,000 per year billed over 4 years with implicit interest of $4,000).
-A member who joins in 2008 elects the installment route and pays his first two $6,000 installments in 2008 and 2009 (only GST is charged on these amounts since the HST doesn’t exist yet)
-In late 2009 or early 2010 (prior to the implementation of the HST), the club offers the member the opportunity to be charged the remaining $12,000 balance on the basis that HST will not apply (it would actually be slightly less than $12,000 because it would be discounted due to the prepayment).
-Does the HST apply? CRA has not yet made a ruling on this yet, they are still debating the distinction of initiation fees internally.
8. Membership Assessment (for private golf clubs) questions from one of our members:
Question
-A club undertakes a significant capital improvement in 2006 and 2007 and finances it with debt.
-In order to cover its loan payment, the club assesses its members $50 per month until the loan is paid off. This $50 charge is subject to GST.
-With the HST announcement, the monthly $50 charge would be subject to an additional 8%.
-Prior to the implementation of the HST, the club gives members the opportunity to pay the present value of their future $50 billings in a lump sum on the basis that HST will not apply.  The club will use the proceeds from those members who elect to do so, to pay down its debt.
-Does the HST apply?- please see the following CRA written response on Dec. 11th:
The membership assessment described in this scenario would likely be viewed as additional consideration for the supply of the membership. If the lump sum payment of the membership assessment becomes due, or is paid without having become due, by April 30, 2010, the Supplier generally would need only to charge GST (5%) on the amount. The Supplier would likely be required to prorate any lump sum payments that become due, or that are paid without having become due, from May 1, 2010 to June 30, 2010 inclusive, based on the original period and charge HST (13%) for the portion of the period that occurs on and after July 1, 2010.
9. Golf tournaments or any special events: - please see the following CRA written response on Dec. 11th:
The CRA confirms that for green fees for golf tournaments and special events that occur at a Supplier’s facility before July 1, 2010, the Supplier will only charge the GST (5%) on the green fees for the event regardless of when they become due or are paid.
For golf tournaments and special events that occur at a Supplier’s facility on or after July 1, 2010, the Supplier would charge the HST (13%) on any green fees for the event that become due, or are paid without having become due, on or after May 1, 2010.
10. Locker Rentals and Club Storage Fees - CRA confirmed the following information is essentially correct in writing on Dec. 11th. In addition it was noted, “Both the locker rentals and the club storage are viewed as supplies of real property by way of lease, licence or similar arrangement, and the transitional rules for leases and licences would apply.”
- If the locker rental fee or club storage fee for the 2010 golf season become due, or is paid without having become due, after October 14, 2009 and before May 2010, a Supplier will only need to charge GST (5%) on the fee.  
 - If the locker rental fee or club storage fee for the 2010 golf season due, or is paid without having become due, from May 1st, 2010 and before July 1st, 2010, a Supplier would prorate the fee based on the rental or storage period which would end on the last day of the 2010 golf season and charge HST (13%) for the portion of the period that occurs on and after July 1, 2010.
- If the locker rental fee or club storage fee for the 2010 golf season due, or is paid without having become due, on or after July 1st, 2010, a Supplier would prorate the fee based on the rental or storage period which would end on the last day of the 2010 golf season and charge HST (13%) for the portion of the period that occurs on and after July 1, 2010.
- If the rental period or storage period is shorter or longer than the 2010 golf season, please refer to the GST/HST Notice 244, Harmonized Sales Tax for Ontario – Questions and Answers on Housing Rebates and Transitional Rules for Housing and Other Real Property Situated in Ontario, which is available on the CRA website for more information on the transitional rules for leases and licences of non-residential real property.
11. Service charges - Currently some Clubs charge a service charge (typically 12-15% of total price of service, i.e. food & beverage) which is required to charge GST on the service charge. This may be charged on the day of play or charged on the monthly membership invoice (at the end of the month).  So should golf facilities continue to charge GST (5%) on this service charge for all transactions until June 30th, but then as of July 1st, the Club will now be required to charge OHST (13%) on this service charge? – CRA’s written response on Dec. 11th.
“The service charges are likely additional consideration for the supply made by the Supplier and as such, the transitional rules that apply to the supply would also apply to the service charge. For service charges related to food and beverages, the Suppliers would continue to charge GST on any supplies made before July 2010. For any supplies that are made on or after July 1, 2010, the Supplier would charge HST (13%) on the service charges that become due, or that are paid without having become due, on or after May 1, 2010.”
Submitted by Ashley Gravett on Mar 01, 2010, viewed 508 times.
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